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OPEC+ agree to cut oil production, deal held up by Mexico

Xinhua | Updated: 2020-04-10 20:53
An Austrian army member stands next to the logo of the Organization of the Petroleoum Exporting Countries (OPEC) in front of OPEC's headquarters in Vienna, Austria April 9, 2020. [Photo/Agencies]

VIENNA - The Organization of the Petroleum Exporting Countries (OPEC) and some other major oil producing countries on Thursday reached a tentative agreement to cut production to stop a market free-fall amid the coronavirus pandemic, pending the consent of Mexico.

The participating countries of the emergency online meeting of the so-called OPEC+, with the exception of Mexico, agreed to cut their overall production by 10 million barrels per day (b/d) for two months starting from May 1, according to a statement released by OPEC early Friday.

The oil producers agreed to cut 8 million b/d for the next six months, followed by a 6-million b/d cut for 16 months from January 1, 2021 to April 30, 2022, it said.

The extension of the agreement will be reviewed during December 2021, it added.

Mexico has suspended its part in the agreement, Kuwait's oil minister Khaled al-Fadhel tweeted on Friday.

Mexico is ready to reduce its national oil production by only 100,000 barrels per day in May and June, tweeted Mexican Energy Secretary Rocio Nahle, who attended the teleconference.

"From 1.781 mbd (million barrels per day) of production that we reported in March 2020, we will decrease to 1.681 mbd," Nahle said, adding that Mexico agreed to stabilize the price of oil at the OPEC Secretariat meeting.

The drop in global oil demand due to the COVID-19 pandemic is "unprecedented in modern times", far greater than that during the great recession of 2008-2009, said OPEC Secretary-General Mohammad Barkindo at the meeting.

"COVID-19 is an unseen beast that seems to be impacting everything in its path," Barkindo said at the meeting.

"The supply and demand fundamentals are horrifying" and the expected oversupply, particularly in the second quarter, is "beyond anything we have seen before," he added.

Barkindo told the ministers that given the current unprecedented supply and demand imbalance, global oil storage capacity is to be exhausted by May.

The OPEC daily basket price has fallen from 52.7 U.S. dollars a barrel last month to below 20 dollars a barrel early this month, a decline of around 70 percent, he added.

"Our industry is hemorrhaging; no-one has been able to stem the bleeding," he said. "We are already seeing some productions shut-ins, companies filing for bankruptcy and tens of thousands of jobs are being lost."

The secretary general called on oil producers to demonstrate the spirit of togetherness and help the industry survive the crisis.

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